Forex Stategies

Forex strategy is a system of organized financial market instruments trading. It involves planning, opening and closing market orders in an organized way in order to achieve one’s trading goals. It relates to and puts together various aspects of trading, like risk management, trading frequency or technical analysis.

There are many ways of trading on the Forex market. Before choosing the right one, trader should define his main objective. The most common trading goals is a speculative profit, but many investors also use FX market to manage their foreign exchange risk (usually through hedging), make arbitrage transaction, learn technical analysis, experiment or even gamble.

Forex strategies types

Knowing his main objective, every trader should determine how much time he’s willing and able to put into trading. Depending on the amount of time at one’s disposal, we can divide FX Strategies into 5 main categories.

1. Long-term Forex trading

Long-term trading is definitely for those who believe in the minimal effort for maximal benefit doctrine. Long-term strategies are based around the idea of opening only up to a few orders per week, month or even a year. The expectations are to catch massive market moves. It’s a perfect strategy for those who have little to no time during the day to watch their trading platform. Key factor in long-term trading is profound and multi-faceted fundamental analysis – it proves to work much better than technical analysis in the longer term. Technical analysis in those strategies is usually used to choose better price for opening a position and rarely anyone tries to predict price moves with long-term technical analysis. Long-term traders usually look and Monthly, Weekly and Daily charts. As for the disadvantages of long-term strategies, one must be aware of additional costs, which are swap points that relate to the difference in interest rates between the countries of interest. Also, fundamental analysis of currencies is much harder than technical analysis and it requires a lot more effort. One should also remember that long-term trading strategies are for people who are patient and immune to market rumors and information noise.

2. Swing Trading

Swing trading is probably one of the most preferable trading strategies out there. It’s not very time-consuming and can be very effective if used properly. Trades are opened for anywhere between a few hours and even up to half a month but the average is couple of days. Swing strategies are usually based on looking for market impulses and closing trades when the momentum weakens. Price move prediction is mostly done through technical analysis - could be classical patterns, simple price action or more advanced techniques. The number of trades per week usually oscillates between 5-15, depending on market volatility. Swing trader looks mostly at Weekly, Daily and H4 charts.

Swing trading requires a lot attention to position management – especially moving SL to break-even point, because impulses often tend to be false and proper risk management is crucial for making swing trading profitable. Good advantage of swing trading is certainly high reward to risk ratio. Because of that, many traders also decide to implement advanced position management techniques like, for example, pyramid trading. Keep in mind that swap costs are also present in this strategy. Swing trading is preferable strategy for those who have some time for trading and can manage their position during the day but trading is not their main activity.

3. Day Trading

Day trading is quite similar in many ways to swing trading but as a general rule all trades are opened and closed within one day – meaning that no trade is being held overnight. This way it’s possible to avoid price gaps on markets with higher liquidity. Day trader usually opens between 5-15 trades per day. Every trade lasts for couple of hours. This strategy requires a lot of time and attention, especially to technical analysis and multilateral market analysis. Every day also needs to pay attention to daily macroeconomic calendar events and news. This all makes this strategy a little harder to implement for those who don’t have much time for trading. There are no swap costs, but bear in mind that with 25-50 trades per week, commissions play large part in benefit to cost calculation. Day trader usually analyzes M30, H1 and H4 charts.

4. Scalping

Scalping is probably one of the most controversial trading strategies out there. It relies on the idea that very small profit repeated many times will sum up to outstanding results. A scalper usually opens anywhere between 15 and 100 trades per day and he pays attention mostly to Hourly, 30-minute, 15-minute, 5-minute and 1-minute charts – with the emphasis on the last 3 time frames. The goal of a scalper is to make as many small-profit trades as possible. Trading costs for scalpers are very high due to the high number of transactions and it should be included in every trader’s profit and loses calculation. Scalping requires devoting full days to trading only. It’s simply impossible to be employed and do effective scalping at the same time.

Why is scalping controversial? Mostly because many beginners lose a lot of money by combining scalping with high leverage offered by many brokers. Also, scalping generates a lot of commission costs. By many standards, scalping also promotes highly risky trading. This is because there is a lot of traders who by mixing scalping with highly risky approach made spectacular return rates. Unfortunatelly, it encourages beginners to do the same and basically any beginner who tries scalping is doomed to failure.

5. High Frequency Trading – HFT

Even though HFT, that is High Frequency Trading is very hard to implement for an average Joe, it definitely should be listed as a forex strategy of 21th century. HFT strategies are driven by a special software, capable of making thousands market orders on extremely short time (often milliseconds). These strategies are fully automated, as the decision-making part of the software should instantly react to market changes. It’s worth mentioning, that HFT strategies are used primarily by banks or other large institutions. This is because they are very costly to create and maintain – they also don’t always guarantee good returns because one slip in a software code could generate a lot of potential losses.

How to choose the best Forex strategy?

In order to suit the trading strategy to your needs you should first determine how much time you can devote to trading. If it’s a lot, you might try day trading or scalping. If it is not a lot of time and you have other activities, long-term strategies or swing trading could be a better choice.

To choose a good FX strategy for you, you should also take look at your experience with trading. If you have little to none experience, you should not choose scalping (because of the reasons above). It’s also not a good idea to choose long-term investing as a beginner because it makes it harder to learn the craft. If you are a beginner, choose either swing trading or day trading. Those will let you learn a lot about technical analysis and not drown in over-complicated fundamental analysis or high trading costs.

Forex strategies on Consilium Invest

Forex strategies on Consilium Invest, even though are divided into those 5 categories above are actually not a described systems for opening and closing trades. Rather than that, strategies on the list are mirrored trades of portal’s users. Every trade they make is mirrored on those strategies.

This feature has several advantages. First off, as a strategy provider you can view your advanced trading statistics of your account and statistics of your every trade. Also, there’s a percentage chart of your performance and you can even write trade’s journal by commenting each trade.

From other’s perspective, strategies on Consilium have some interesting functions: -they allow you to see exactly how other traders trade through automated push notifications about trades and modifications -they allow for mirroring trades made by professionals or good performing users (they work as trading signals platform) - they generate alerts about potential opportunities, price formations or setups

…and much more. To see how it works exactly, simply start following strategies that are active.

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